2019 is at our doors and at this important juncture people are talking and thinking about how 2019 will be from world economy point of view. Most experts believe that unlike 2018 beginning 2019 will continue to see the trade war between largest economies of the world, yes you are thinking this right we are talking about US and China who have gone to full-blown trade war by imposing tariffs on one another’s import to the respective countries.
This retaliatory action does not only continue disrupting the world economy in 2019 but will also result in seeing some industries take a major hit due to this trade war, the auto industry is one such industry as it heavily depends on steel and aluminum which we were the major chunk of commodities which saw a rise in tariff. Let now discuss the important economic predictions for 2019 which will mainly affect due to above mentioned and many other reasons.
Global Economic slowdown especially Europe: Global Economic slowdown will continue to hunt the world economies as European markets will continue to struggle to expand due to reasons like Brexit. Emerging markets on another hand will also see a dip in their growth figures as oil prices will remain fluctuating throughout the year plus global financial situation is becoming stricter and the dollar will continue to be strong.
Major Economies continue to down perform: World major economies like China will continue to see downfall and is expected to be not more than 6.3% for the manufacturing and export giant. Though China is thoughtfully looking at the issue and working to have a solution on the plate as soon as possible as mentioned earlier trade with the US is downplaying all the efforts that are being to stabilize the situation.
Dollar to Strengthen: Dollar will continue to strengthen and will dominate other currencies. As the European market is and will remain very uncertain due to Brexit and serious situation in economies like of Italy, Greece, and Turkey. This is hurting the euro and benefitting dollar. But one more thing which started in 2018 and we hope will continue in 2019 is that some major economies have started to trade bilaterally using their own currency as China and Russia and India and Iran did most recently. This is a step to diminish the dominating stature of Dollar.
Rise in Interest Rates: Next year Brexit pending process is going to happen so global banks and banks like US Federal reserves will raise interest rates multiple time in 2019, the last one just happened in this month December 2018. Banks of developed economies like UK and Canada will also raise the interest rates and so are the banks of emerging markets like Russia, Brazil, and India. While Japan will continue the negative interest rate policy and European Central bank will possibly not increase interest rates in 2019. Chinese banks, on the other hand, will try to keep it down to promote growth and investment.
US growth story will continue: As US head of state is pursuing aggressive inward-looking policies on the world level though he may be earning a bad name within the US that has proven to be fruitful. Massive tax cuts and rebates on businesses in 2018 has created new jobs and opportunities for the US markets and the trend will continue to be the same in 2019. But this will fade out at the end of the year leaving US overall growth may be 2% less than 2018.
Inflation may rise slightly but not a factor to worry: Initial impression can be there for global inflation to rise a bit but that will eventually be neutralized as the year will progress. It is forecasted to remain at 3% at the end of the year.
Emerging market growth story will see a slump: Major reason while emerging markets face a challenge in the coming year becomes advanced economies will see a slump as well in their growth and due to the dependency on these markets emerging markets will also face the adversities. Experts believe that it is going to dwindle down to 4.6% from 4.8% in 2018. Next reason is strong dollar which we have already discussed and third is growing and fluctuating commodity prices which remained a trend in 2018 where we saw oil prices at as high as 80 dollars per barrel until October and now again it’s close to 50 dollars per barrel. Final reason will be the geopolitical issues in few emerging nations plus elections as well in few of them. These factors cause major restraint among foreign investors who feed the FDI for these emerging markets.
Japan and its worries will continue: Japan’s worries will continue to flourish in 2019 as well as they struggle to keep up the paces of the economy due to major trade wars happening around the world plus its own aging population is one more concern for which till now it has not found any solid solution. The only hope they see is in real estate and that also due to 2020 Olympic which they are going to host. Experts believe that growth will continue to remain below 1% for Japan in the coming year and their banks will continue their negative interest rate policy.
Commodity market and its risks: Strong dollar, uncertain political conditions, and lesser credit opportunities will cause uncertainty and volatility in the commodity markets as well. All in all, the experience in the commodity market will more or less remain the same as it was in 2018 i.e. major ups and downs across the year.
High debt levels: Will 2019 see another recession; some experts say that a major rise in debt levels and their meek possibility of getting them paid completely can trigger another recession. But some say that economies have learned from their mistakes and will try and remain immune t any such situation in 2019.
All in all, Trade wars, political scenarios will dominate economic course in 2019. Hope for the best
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